Pension funds slow to react to market volatility

Decision-makers at pension and retirement plans cannot react fast enough to implement big asset allocation changes despite the appetite for alternatives from fund managers.

The latest AMP Capital Institutional Investor Report said slow decision-making processes mean any 12-month period is too short to implement any significant asset allocation changes.

AMP Capital chief executive international and head of global clients Anthony Fasso said 41 per cent of those surveyed said it would take them at least three to four months to decide to change allocations, plan a strategy and implement that change.

But 35 per cent said it would take more than six months.

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"This is concerning as it implies that more than a third of schemes are not able to react quickly to market volatility," Fasso said.

One chief investment officer of a North American pension plan with US$1 billion-$10 billion of assets under management said while decisions on asset allocations are made at the staff level, the Board has to approve it, "and this process is slow and inflexible".

Fasso said: "Investment decision makers at retirement plans recommend speeding up the decision-making process regarding asset allocation changes as well as making the process more independent from plans' trustees and boards."

Only 15 per cent of those surveyed said it took between one and two months to execute a strategy to change asset allocations.

The survey of 56 investors were from North America, Europe, and the Asia-Pacific region (including Australia and Japan).